Preauthorisation of charges by accommodation providers

The
Australian Competition and Consumer Commission (ACCC) is the independent
statutory authority responsible for enforcing the Competition and Consumer Act
2010 (the CCA). The purpose of the CCA is to “enhance the welfare of all
Australians through the promotion of competition and fair trading provisions
for consumer protection.”

The
ACCC has recently assessed concerns regarding whether the use of
preauthorisation charges by accommodation providers in Australia may give rise
to potential issues or contraventions under Australian Consumer Law (ACL).

Although
an industry-wide approach to the use of pre-authorisation charges is unlikely
to result in a breach of ACL, ACCC appreciates that this practice may lead to
consumer detriment, in some circumstances. These include:

Where
there is a lack of transparency over the purpose and justification for the use
of preauthorisation charges;

Where
there are unreasonable delays in the release of funds, and

Where
preauthorisation charges do not appear to be proportionate to what is
reasonably required to protect the provider’s legitimate interests.

To
avoid any risks that the use of preauthorisations may raise issues or result in
the potential for consumer detriment, ACCC encourages hoteliers to consider the
following:

Be transparent and
upfront about the purpose and justification for the preauthorisation

Accommodation
providers should ensure that guests are aware that a preauthorisation will be
required, and the justification for its application. This should occur at the
time the booking is made, and on check-in prior to any preauthorisation being
applied to a guest’s card.

Cancel or complete
preauthorisations as soon as possible

The
ACCC understands that this is a requirement under Mastercard and Visa
preauthorisation standards, and it is important that all staff are aware of this
requirement. ACCC is aware it can take up to five days for financial
institutions to release funds, however it is important the merchant cancels the
preauthorisation as soon as possible, to avoid further delays.

Ensure that the
preauthorisation amount is proportionate to the legitimate interests being
protected

The
ACCC understands that accommodation providers require a preauthorisation to
cover any incidental charges incurred, and to act as a deposit for any unreasonable
breakages or damage that may occur during a guest’s stay. Incidental charges
may include mini bar consumption, dry cleaning, phone calls and other in-house
services provided by the property. ACCC appreciate that the preauthorisation
amount will vary between properties, and that this amount should be
proportionate to the specific risks foreseen.

Consider what
alternatives may be available

The
ACCC acknowledge that it is up to each individual property or chain to decide
whether to accept cash deposits, in lieu of credit or debit card
preauthorisation, however encourage hoteliers to be flexible and discuss other
options with guests who may be concerned about this process.

It
should be noted that ACCC do not plan to take any further action at this time,
however they will continue to monitor complaints received about the use of
preauthorisation charges by accommodation providers. ACCC will reconsider
further action, if they receive further information that indicates a breach of
these practices may have occurred.